- Sebi issued an interim order on alleged trade manipulation in the Closing Auction Session
- Copthall Mauritius and Mansi Share accused of manipulating SENSEX on August 13
- Copthall placed aggressive buy orders causing sharp index spikes during the auction
The Securities and Exchange Board of India has issued its first interim order over alleged manipulation of trades in the Closing Auction Session, putting the spotlight on the vulnerabilities of a new mechanism introduced less than three weeks ago.
The order relates to trading on August 13, when the SENSEX was due to settle weekly derivative contracts. SEBI has named Copthall Mauritius Investment Ltd and Mansi Share and Stock Broking Pvt Ltd as noticees, alleging that both used aggressive orders in the cash market to influence the index and benefit positions in SENSEX options.
The Closing Auction Session, introduced from August 3, begins after normal cash-market trading ends at 3:15 pm. A reference price is established between 3:15 pm and 3:20 pm, followed by an auction from 3:20 pm to 3:30 pm to determine closing prices. Movements in constituent stocks during the auction can therefore affect the index's final level and expiry-day option payoffs.
The SENSEX reference price on August 13 was 77,829.60, but the index ultimately closed at 78,080. SEBI identified three sharp upward spikes and a broader downward move.
In the first spike, the SENSEX jumped 362.02 points in about two seconds. A second spike added 132.67 points in 12 seconds, while a third saw the index surge 405.08 points in 28 seconds.
SEBI attributed the upward pressure to Copthall, which placed aggressive buy orders at the maximum permissible limit of 3% above the reference price across SENSEX constituents. In the first spike, Copthall accounted for 99.91% of total buy-order value, or Rs 66.57 crore. It accounted for 96.09% of Rs 126.59 crore in the second episode and placed Rs.98.12 crore of orders in the third.
SEBI said Copthall cancelled its latest buy orders at 3:26:21 pm, indicating they were not placed with a genuine intention to acquire the shares.
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Mansi, meanwhile, allegedly pushed the index in the opposite direction. It placed sell orders for 12.65 lakh shares across eight SENSEX constituents, valued at Rs 143.43 crore, at prices substantially below the reference price. SEBI said 99.06% of these orders were cancelled within seconds after the downward pressure had been created.
SEBI linked the trades to derivatives positions. Copthall held synthetic long positions through calls and puts at 77,500, 78,000 and 78,500 strikes, while Mansi held net buy Put positions at 77,800, 77,900 and 78,000 strikes.
SEBI estimated wrongful gains of Rs 2.96 crore for Copthall and Rs 71.65 lakh for Mansi. It said the SENSEX should have closed around 77,840 based on equivalent Nifty 50 closing values, rather than 78,080. According to SEC Copthall is a subsidiary of JP Morgan.
Importantly, SEBI said there was no prima facie evidence that the two entities acted in concert.
SEBI ordered banks to impound the alleged gains, barred both entities from participating in the equity CAS and restricted their assets and accounts. Mansi's proprietary trading account has also been restrained from accessing the securities market.
The order marks a test for the CAS framework, designed to improve closing-price discovery but now facing its first manipulation case.
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